Latin America Emerging Markets Research Venezuela Update: Signs of a negotiated solution     New developments overnight suggest an attempt at a negotiated solution to the political crisis that followed the narrow victory of the government candidate Nicolas Maduro over opposition leader Henrique Capriles.   [Currently with 99.2% of votes counted the CNE has given Maduro 50.75% of the valid vote, compared to 48.98% for Capriles -- a difference of some 262k votes.   Maduro is scheduled to be formally inaugurated for the remainder of the 2013-19 term later today, Friday.]    Last evening, in chronological order:   1. Venezuela's electoral authority (CNE) announced that it would grant a full audit of the 46% of ballot boxes that were not audited immediately after April 14.  This does not entail a full vote-by-vote recount; rather a relevant sample of the paper receipts of each ballot box will be compared with the official electronic tabulation.  The CNE said this process will take 30 days and they would provide regular updates every 10 days.   2. Henrique Capriles held a press conference in which he said he was satisfied with the CNE's response and confident that his concerns over irregularities would be revealed in the 46% of remaining ballot boxes. Capriles said he was prepared to go to a regional UNASUR presidential summit last night to discuss the crisis, but he stayed in Caracas to respond to the CNE ruling. He also called for calm and "no anarchy" at today's inauguration, which his supporters should peacefully protest by banging pots and pans (cacerolazo) and blaring salsa music.   3. The UNASUR summit in the early morning hours of Friday issued a declaration recognizing Maduro's election but praising the CNE's audit decision, and calling on all sides to respect the CNE's final conclusions. The summit declaration also deplored the violence that followed the result and agreed to send a commission to follow the investigation into those events.   Link to the UNASUR declaration (in Spanish) is here: http://www.presidencia.gob.pe/declaracion-del-consejo-de-jefes-y-jefas-de-estado-y-de-gobierno-de-la-union-de-naciones-suramericanas-unasur     In our view, the way the events unfolded suggest some kind of negotiated solution took place yesterday. In sum, regional leaders agreed to recognize Maduro, but only on the condition of the CNE conceding the vote audit. For his part, Capriles would agree to recognize the CNE results and not disrupt Maduro's inauguration today.   The successive timing of these announcements yesterday night (1. CNE, 2. Capriles, 3. Unasur -- with all the presidents up well after midnight) suggests this agreement was to some degree negotiated beforehand and coordinated, which should help reinforce its goal in easing the crisis.   Indeed, barring some unexpected twist we think the immediate crisis should ease, and the immediate risks that the crisis will escalate into outright institutional breakdown are lower.   Market focus should gradually shift to analyzing Maduro's relative political strength going forward and his ability to address economic concerns. We think there are still major questions surrounding both issues, and will watch for signals in the coming days to hopefully provide more clarity (see our Monday April 15 note: “A tenuous victory for Maduro; move to marketweight"). Ben Ramsey (AC) (1-212) 834-4308 benjamin.h.ramsey@jpmorgan.com J.P. 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